Keeping intellectual property safe from Mickey Mouse diplomacy

WHAT are Australia’s strategic interests when negotiating with other countries on the extent of intellectual property (IP) rights – for instance, the duration and strength of patents and copyright? It’s no Mickey Mouse question, as we’ll see, but it’s not yet properly on our agenda.

In the mid-1990s, we bowed to pressure from the US for signatories to the World Trade Organisation to extend patent life from 15 years in many countries to a minimum of 20 years.

It was never going to do much for innovation. The net present value of extending a project’s life beyond 15 years is usually very low. But it’s negligible for highly uncertain assets such as IP. And even if IP extensions were worthwhile, they could only be worthwhile for new patent terms. But the IP lobby successfully secured retrospective extensions to its existing patents.

In 1998 a retrospective extension of copyright terms in the US prevented Mickey Mouse tumbling indecorously into the public domain from the more ardent ownership of Disney Corporation, a major sponsor of the legislation.

Ironically, excessive and clumsy IP protection probably imposes its greatest cost not on consumers but on producers of IP themselves because, as Isaac Newton put it, we stand on the shoulders of giants. Tomorrow’s IP is built on today’s. The legal costs of owning patents now outweigh the benefits of owning them in most industries other than pharmaceuticals and chemicals. In 2008, American firms paid $29 billion in legal costs against ”patent trolls” – ie, firms that own patents not in order to develop the relevant technology but to extort money from firms that do!

In 2009, the firm Hospira sought to export nearly $2 billion of generic drugs from Adelaide to export markets in which the relevant patent had expired while they waited to sell into Australia once the patent had expired here. Australian officials argued that the recent Australia-US free-trade agreement AUSFTA prevented such an arrangement and forced production offshore to India. AUSFTA had also kept Mickey Mouse safe from Australia’s public domain – retrospectively extending copyright by 20 years.

That’s a small snapshot of issues we could have brought to the IP negotiation table with other countries. We’re currently negotiating the Trans Pacific Partnership (TPP) with the US and nine other Asia-Pacific countries. The Americans are taking our previous concessions and pushing for more – for instance, a further retrospective 20-year extension of copyright terms. (Will Mickey ever be free?) Yet far from pushing back with equal and opposite force, official Australian aspirations rise no higher than hanging on to our existing hodgepodge of IP compromises.

It gets worse.

Because it’s being negotiated between ”sovereigns” – that is executive branches of government – the content of the negotiations is secret. The TPP is being negotiated outside the auspices of the World Trade Organisation and the World Intellectual Property Organisation. Those organisations understand how counterproductive secrecy can be by undermining community trust and release draft text periodically throughout negotiations.

DFAT seems embarrassed by the level of secrecy and consults its little head off. But what kind of consultation can occur around a secret?

Trade Minister Craig Emerson criticised secrecy in negotiations from opposition, but signed on to it as the price of being in the tent. But suspicions thrive about secret processes and things are starting to unravel. Last week, a similar treaty – the so-called Anti-counterfeiting Trade Agreement (ACTA) – was resoundingly defeated 478-39 on the floor of the EU Parliament. Last month a committee of parliamentary backbenchers made more sense about it than the minister or his department, arguing that the agreement should not be ratified until it had been independently assessed as beneficial.

Australia could become a leader, a beacon of sense in this Kafkaesque world.

We’ve got form. We initiated the Cairns Group to enable agricultural exporters to collectively tackle a corrupt trading system that systematically disregarded their interests. And we’ve been global leaders on policy transparency for decades, requiring all domestic tariff changes to be accompanied by public expert and independent analysis.

While acknowledging the need to protect IP, we could lead the charge in forming a coalition of net importers of IP – like us and every other country in our region!

A central aim and tactic should be to introduce into IP diplomacy the same kind of transparency that the Productivity Commission (PC) enshrines in our own domestic arrangements.

And for as long as other countries stonewalled, we could go it alone, funding independent PC analysis and commentary on the various texts at any country’s request.

Even where elaborate quantitative analysis was impracticable, a simple qualitative appraisal of the kind I’ve given above would bell the cat on the most cynical abuses. It might spell the end of Mickey Mouse diplomacy.

If all you did was put an absolute unbreakable ban on any retrospective extension of existing IP rights… that would probably be enough to change the game. I fully respect the tradeoff between the private good of encouraging innovation (and private profit) in the first place and the public good of opening up that innovation to the greatest number of people. I don’t personally see that we are desperately short of creative output, nor that there is any notable economic scarcity in that department, but anyhow some sort of balance needs to be struck.

However, in the case of extending the private property rights on existing IP there can never be a particular incentive to encourage innovation on that particular IP. It’s already been created. Whatever incentive existed a century ago to encourage Walt Disney to rip off Buster Keaton must have been sufficient incentive to make it happen, so in terms of private/public tradeoff the deal has been done. We might validly worry about future deals, with potential future rights holders, but existing rights holders certainly don’t deserve any opportunity to argue for a bigger bite out of a pre-cooked pie.

Stringently enforcing copyrights basically shoots the owner in the foot, so it’s stupid but not detrimental to the overall ecosystem of art and music etc.

But patents desperately need an overhaul. The problem is not with the concept, but with the execution. I would like to see the value of patents capped some multiple of the difference between the cost of researching an invention and the cost of developing an implementation independently.

For example, the CSIRO WiFi patents seem legit in the sense that we presumably invested millions in developing the exact mechanism which everyone else subsequently copied (at a far lower cost), so it makes sense that we could ask for compensation up to, say, 5 or 10 times the cost of research to ensure sufficient incentive to research. Part of lodging a patent should be a documented accounting of the costs of research.

The beauty of this approach is that things like Amazon’s 1-click patent (the poster child for patent stupidity) might have cost, optimistically, $1 million in staff costs. If similarly major companies could simply “buy out” a patent to make it freely usable, that would allow an instant defusing of the stand off. Hell, the general public could do a Kickstarter campaign to buy out a patent if it annoyed us that much!

Europe for example has 250+ collecting entries with 6 billion Euros in total collections . Europe also has a very Balkanized privatized levy system on things like memory devises and web traffic – there is even a special levy for the German porn industry. These collection societies have a lot of time and money for lobbying on a global scale.

In the UK just posting a link to a “headline” can be a breach of copyright.
“in a summary decision the UK courts have held that merely linking to a website that has published unlawful content could incur liability (McGrath v Dawkins).”